• Overview of ETF trends, including shifting preferences toward actively managed funds
• Best- and worst-performing ETFs and market influences such as digital assets
• Key tools and resources found at AAII’s online ETF guide include category comparisons

Exchange-traded funds (ETFs) continued to gain assets in 2024. Investors smashed the 2021 record of $902.6 billion by investing $1.1 trillion into U.S. ETFs, according to Morningstar. VettaFi noted that total ETF assets under management (AUM) grew to $10.4 trillion in 2024.

Net ETF flows—the difference between dollars invested and dollars taken out—totaled $598.3 billion in 2023. Less juicy yields in money market funds and other short-term cash assets pulled investors off the sidelines and into longer-term assets.

ETF returns were mostly positive in 2024. Within the equity asset class categories in the print version of this guide, only the equity energy, global real estate, miscellaneous and natural resources sector categories realized losses in 2024. For fixed income, all but two categories posted gains in 2024. In total, about 87% of all ETFs with full-year returns rose in value in 2024, a similar percentage to 2023.

The ongoing shift toward passively managed investments continues to increase ETF flows. The majority of ETFs, particularly the largest ETFs, continue to track indexes. Out of our universe of 3,980 ETFs, 53% track an index. The use of ETFs by financial advisers, asset allocators and tactical portfolio managers is rising, as they provide targeted exposure at low expenses in a vehicle that can be easily traded.

The preference for tax-efficiency is exhibited by the increase in the number of actively managed ETFs. There were 1,862 ETFs in our universe not designated as index ETFs by Morningstar at the end of 2024, 36.7% more than at the end of 2023. The median tax-cost ratio for actively managed ETFs in existence long enough to calculate it is 0.61%.

These funds tend to be neither large nor cheap as a group. The median actively managed ETF had $54.4 million in total assets and charged an average expense ratio of 0.69%. Approximately 13,000 shares of the median actively managed ETF are traded on the average day.

Actively managed ETFs continued to expand their reach in 2024, representing $295 billion in flows, according to Morningstar. The trend of mutual funds converting to ETFs also continued, as popular strategies were replicated in ETFs. In 2024, there are 55 conversions, compared to 35 in 2023.

Large Growth ETFs Surge Ahead in 2024

The 50 best-performing ETFs are shown in Table 1. Though this list is more diversified than last year’s, large-cap growth, technology and digital assets represent the majority. Digital assets has eight ETFs in this list and technology has nine. Combined, these two categories represent seven of the top 10 performers.

Investors have continued to prefer technology stocks, which are prevalent in both large-growth and technology ETFs. Many of the digital asset ETFs in Table 1 are related to cryptocurrency. Cryptocurrency rose due to both the launch of bitcoin ETFs and the second Trump administration’s friendly stance on digital assets.

One of these cryptocurrency-focused funds, the Osprey Bitcoin Trust ETF (OBTC), was the top-performing ETF in 2024, with a 119.8% gain. The passively managed ETF was launched in early 2021 and tracks the price of bitcoin. Its total risk index of 4.16 is among the highest in the table and implies that the fund has been four times more volatile than the average ETF. Other digital asset winners in 2024 include the Grayscale Bitcoin Trust ETF (GBTC), which gained 118.7%, and the ProShares Bitcoin ETF (BITO), which gained 105.3%.

Technology remained hot, with the best performer being the Roundhill Magnificent Seven ETF (MAGS). The actively managed ETF returned 64.6% for the year. The second-best tech performer was the Defiance Quantum ETF (QTUM), which utilizes a passive management style and focuses on companies in the machine learning industry.

The top large-cap growth ETF, the American Century Focused Dynamic Growth ETF (FDG), got a boost from Nvidia Corp. (NVDA). The ETF returned 45.7% in 2024. Nvidia makes up 15.3% of the ETF’s holdings.

You will notice four YieldMax ETFs in Table 1. YieldMax ETFs generate monthly income by pursuing options-based strategies built on the appreciation of a single stock or another ETF. These ETFs do not invest directly in the underlying stocks or ETF. Monthly income is created from options premiums.

Completing the top 10 performers is the Global X MSCI Argentina ETF (ARGT). Investors were bullish on President Javier Milei’s economic reforms in Argentina.

Investors Cool on Clean Energy ETFs

The Inflation Reduction Act of 2022 provided funding for the transition to renewable energy. Even with this spending, investors’ sentiment toward clean energy ETFs cooled. Rising interest rates, inflation, supply-chain issues and consumer hesitancy toward electric vehicles have created challenges for renewable-energy companies.

ETFs investing in Mexico and Brazil were also among the worst performers in 2024. Investors are concerned about fiscal challenges and currency depreciation in Brazil. Mexico’s recent elections have raised concerns about governmental interference in the economy. Recent political turmoil in South Korea is reflected in ETFs focusing on the country. These trends are shown in the list of the 50 bottom-performing ETFs in Table 2.

The YieldMax MRNA Option Income Strategy ETF (MRNY) topped the worst performers, losing 59.3%. This ETF tracks biotech company Moderna Inc. (MRNA). Moderna faces pressure after lowering its 2025 sales forecast due to declining coronavirus vaccine demand and a slump in the biotech and drug sectors. Nine country-focused ETFs are included in Table 2.

Cannabis ETFs performed poorly in 2024. The Amplify U.S. Alternative Harvest ETF (MJUS) and the AdvisorShares Pure US Cannabis ETF (MSOS) are the second- and third-worst performers for the year, losing 46.2% and 45.4%, respectively.

A handful of taxable fixed-income ETFs with exposure to the longer part of the yield curve are included among the bottom 50 performers for 2024. Remaining maturities of at least 25 years make the payments of U.S. Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS) in the ETFs very sensitive to yield changes. All had double-digit losses for 2024.

BlackRock and Vanguard Still Providers of Largest ETF

The SPDR S&P 500 ETF Trust (SPY) continues to be the largest ETF. It is also the oldest. The ETF had $623.8 billion in assets at the end of 2024, up from $497.0 billion at the end of 2023. Total assets for the second-largest ETF, the iShares Core S&P 500 ETF (IVV), increased to $585.7 billion at the end of 2024 versus $399.6 billion at the end of 2023. Both the iShares Core S&P 500 and the third-largest ETF, the Vanguard S&P 500 ETF (VOO), have expense ratios of 0.03%, versus 0.09% for the SPDR S&P 500.

BlackRock’s iShares and Vanguard have the largest portion of the 50 ETFs listed in Table 3, with 37 ETFs between the two companies. Thirty-seven of the 50 largest ETFs on the 2023 list were also either iShares or Vanguard funds.

About This Year’s Guide

This year’s ETF guide makes use of the data and tools available to members on AAII.com. They include our ETF grades and category averages. Data on nearly 4,000 U.S.-traded ETFs is updated monthly and is available online to all AAII members. The print and PDF versions of this guide provide data on 383 ETFs of broad interest to U.S. investors. Key data on individual ETFs covering a broad range of asset classes, fund groups and categories is provided. Among the information you will find are calendar-year and annualized returns based on net asset value (NAV), yield, expense ratio and portfolio turnover.

Category averages and ETF grades are listed online to help you quickly assess whether a particular fund’s annualized returns are above or below its peers. The category averages provide a peer-based benchmark to compare a given fund against. They allow you to quickly see if a fund is more or less attractive than the other funds in the same category.

The grades range from A to F. Each of these grades is tied to a percentile rank based on how a specific ETF compares to its category peers. An ETF’s average annual return for a given period that ranks in the top quintile (best 20%) relative to its category peers will receive a grade of A. Lower grades are assigned for lower quintile rankings. So, a grade of C means the ETF’s average annual return for a certain period is about average (the 41st to 60th percentile) compared to its category peers.

In the print and PDF versions of this guide, grades are provided for three-, five- and 10-year annualized returns. Online, grades are provided for additional periods as well as for category risk and expense ratio (for these two figures, the lower the rank, the higher the grade).

Considerably more information is provided about each ETF online. At the ETF guide, you will find details about which index an ETF tracks, its portfolio allocation, beta for equity ETFs, interest rate sensitivity (how sensitive an ETF’s returns are to changes in interest rates) for bond ETFs, inception date and whether it uses leverage or is otherwise an inverse ETF. This data is updated monthly and can be downloaded to spreadsheets by clicking on the green “Export to Excel” button.

All AAII members can also track ETFs they own or are interested in with the My Portfolio tool. Clicking on an ETF’s name or ticker (or typing either into the search box located at the top of most pages on our website) will call up our ETF Evaluator. This page provides valuable information and data about the ETF you are most interested in.

Which ETFs Were Included

ETFs appearing in this guide are listed on U.S. exchanges. The following explains the criteria we used to screen for and then identify which ETFs to include in the print and PDF versions of this guide.

Categories

The starting point for determining which categories to include is the ETF groups matching the AAII Asset Allocation Models. The stock and bond ETFs comprising these groups are also those most frequently held in individual investors’ portfolios. We then expanded the list of ETF categories to cover those of interest to a large number of investors. This latter group includes sector ETFs, high-yield bond ETFs and allocation ETFs. To the extent possible, we included categories similar to those appearing in the mutual fund guide. The digital asset category is new to Table 4 this year, added due to its growing popularity.

Historical Record

ETFs were generally required to have three full years of data to be included in Table 4. This requirement ensures that there is a performance record of significant length and that all performance measures can be calculated.

The requirement for three years of return data was loosened for the listings of the best- and worst-performing ETFs (Tables 1 and 2).

Size

All ETFs are generally required to have at least $1.5 billion in assets. The size requirement was relaxed for the top and bottom performers (Tables 1 and 2).

Expenses

Due to the generally lower cost of ETFs, a cap on expense ratios is not used. Only a small number of ETFs appearing in the print and PDF versions of this guide have expense ratios of 0.70% or higher.

Performance

To include a larger number of ETFs, performance requirements were not applied. The majority of the ETFs appearing in this guide have three-year annualized return grades of C or better. Such ETFs either outperformed their category peers or have three-year annualized returns similar to their peers.

Interest and Availability

Only those ETFs that are of general interest and are available to individual investors are included.

Go to AAII.com for More on ETFs

AAII members who would like additional details on the ETFs included in the print version of this guide or who would like to see the ETFs that did not appear in the print version can access this information at the ETF guide, where data on nearly 4,000 ETFs can be found.

Additional analysis can be conducted with our Compare ETFs tool. You can use it to compare and contrast return, risk and turnover information for two or more ETFs. 

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